Venture Capitalist Mindset: Why Token Price Is A Lousy Indicator Of A Project

in LeoFinance2 months ago

Have you ever wondered how Venture Capitalists can make so much money? Did you ever think about the mindset they need to hang in there with so much uncertainty?

The truth is VCs are one of the main driving forces behind technological advancements. They are the ones who provide the different rounds of funding to keep projects going. To say this is a risky business is an understatement.

Of course, their track record is far from perfect. In fact, they lose more often than they win. Most projects fail miserable; a total loss.

It is a part of the business those in it accept. The goal is to hit it big on 1 out of every 10 projects. There will be some that provide a payback, usually between 20%-30%. The rest end up completely worthless.

What makes this approach profitable is they only need to hit on the 1. When that takes off, that more than covers the losses incurred on the other projects.

There is another vital aspect to this: they do not even look at the payback for 7-8 years. This is usually how long they commit to a project when it is starting. Nothing is certain other than the fact it will not be an overnight process.


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Companies of this nature tend to burn through cash for a lot of years. Making money is not the primary objective in the early days. Bringing a viable project to market and then getting users is the primary focus.

We can see the opportunity to do something similar through tokenization. The scams and cons aside, it was the basic system of the ICO craze. Project teams put together an ICO to raise money to fund their endeavor. This is no different than what VCs do, only it lacked the SEC's approval.

Ultimately, we are witnessing the same thing with the cryptocurrency industry today. Many projects are tokenized, providing the opportunity to develop something really special. However, many will fail just like in the VC world.

There is one advantage VCs do have that is not applicable to tokenization. When a VC enters a project, there is no mark-to-market being done. Other than when new funding rounds are completed, nobody has any idea what the company is worth. Quite frankly, nor does anyone care at that point.

Can you imagine a start up project where the VCs were calling the company each day asking what is going on since the value of the project dropped 25% overnight? Do you think this mindset would be productive to the long term success of the project?

It is not likely. In fact, it would be chaos. Some VCs would get extremely discouraged and want their money back. Of course, since it is not a profit generating project, many would fret about losing money in a 6 month or 1 year period of time.

Ultimately, we would see much of the system collapse.

Fortunately, for technological progress, this is not how it operates. VCs do not care about the value for the first half decade. It is more important to progress down the road developing, believing that the ultimate success will provide an enormous windfall.


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This is not a luxury we have in the cryptocurrency. Tokenization provides a lot of benefits. However, there is on major drawback: daily mark-to-market.

People who are involved are constantly focusing upon the price. They want to know what is going on. Why is the price dropping? How come other projects are worth more?

Eventually, many cannot take it and sell out. They believe the project sucks because the token price fell 80%. The fact it doesn't move when others are must mean it is a crap project (and sh*tcoin).

Does any of this sound familiar?

Here on Hive, we see this type of stuff everyday. When mooning? Why is the token dead? HIVE is just a stablecoin.

This is the problem with real-time, mark-to-market. At any moment, an individual can see what the market values the project at. There is a running scorecard which tells everyone the story, or so they think.

The reality is the price does not matter since markets are often insane. Few are aware what is taking place with the development on Hive. They are not researching the depths of the different teams creating stuff. Hell, there aren't even any industry analysts who are putting materials together for people to research.

It truly is the VC world where only those who are actively involved have any idea what is taking place (and even then, that is only a small portion).


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Hive is less than a year old. Think about that for a second. People are making judgments on a project that is still in its first year. How much development do these people think can be done in such a short period of time?

Of course, the retort will be there was more than 3 years as Steem. That is true yet this is a new project. The fact there was code and applications used from the legacy system means little. In the technology, no project starts from absolute zero. There is always something that is being modeled, old code used as a starting point, and different assets each of the development team brings to the table.

In other words, framework software is usually available to get the ball rolling.

Now let us look at Hive in a different light.

What if there was no token price to give a daily accounting of what the market thinks? Instead, what would things be like if we only had the development and progress there to go by? What if other metrics were required to chart how things are going?

Let us use what many believe are the things starting to make a difference:

  • Leofinance's LeoFi and Microblogging App
  • 3Speak's SIP and Decentralized Video Storage
  • @disregardfiat's decentralized smart contract platform
  • Universal NFTs
  • @ctp's platform for online entrepreneurs

How are these projects doing? Is progress being made? What stage are each of them at? Are you keeping tabs on what is taking place?

This is what VCs do. They monitor the development and progress of the projects they are invested in. There are road maps put together that are followed, with metrics in place to monitor when levels are achieved. This is something that few in the crypto world do. Nevertheless, it is vital to the ongoing success of the project.

Innovators often hate the requirements put on them by the "money people". They just want to create. However, this is business 101 when it comes to bringing successful things to market.

In crypto, there are no such requirements. Few think like this. Instead, they just go along banging away at their keyboards while the rest of the world is left wondering what is taking place. To them, silence means nothing is happening.


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This is the mistake most make. There is something happening. In fact, we see a lot taking place. It is true one has to search deep for it since it is not easy to find. Yet, if one takes that approach, he or she can find some gems that are sitting out there. This is where the huge money is made.

It is ironic that this article comes out on a day when the price of HIVE was up 10%. That means many will be happy since they believe there is validation. Ultimately, it means nothing more than if the price was down 10%. The price is not a sign of what is taking place.

Up 10%, down 10%, the development is still progressing at the same speed. Where the price is today matters none (unless you are trying to buy in). Outside of that, the true payout is going to come down the road.

Every VC knows you don't make your money in the first year or two. It is a long-term commitment that will face many challenges. However, the projects that overcome those issues and find a place in the market provide an enormous windfall.

This is how finance and technology merge. In the crypto world, it seems the financial aspect is relegated to the casino that is the market. Paying attention to that most often provides false readings.


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If you found this article informative, please give an upvote and rehive.

gif by @doze

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logo by @st8z

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One of my favorites of your posts. Love it. Lots of separate teams making really important foundations for future success. We have a sort of decentralized success plan where we hopefully don't have to depend on just one team... well I guess maybe we are still a bit too centralized in the blockchain developer area bit at least less so than steemit Inc days

well I guess maybe we are still a bit too centralized in the blockchain developer area bit at least less so than steemit Inc days

That might be true but cant really have too many hands in the base code cookie jar. If that was open to any developer, the code would become a mess.

So yes the fact that we advanced beyond the STINC days is a big step forward. I think we see it in the results over the past 10 months.

Lots of separate teams making really important foundations for future success. We have a sort of decentralized success plan where we hopefully don't have to depend on just one team..

This is how things go exponential. We can see a few breakthroughs which will end up feeding other projects. We are still looking for the first but when we get it, things will really start hopping.

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there's a difference between helping to bake cookies and deciding what cookies you'll actually put up for consumption. We could have more cookie makers if we find a good system to quality assess how good the cookies are.

Also a random side note I've been meaning to ask someone... do they force you to advertise for them on every post and comment or is that an option you can turn on an off? "Posted using" I bet lots would still choose to use it but sucks if it's forced spam.

Venture Capitalists, that's something I had heard but hadn't paid attention to,
1 out of 10 profit that is a big loss but maybe one who wins will compensate what the others lose true, sparks would never have the patience, I have barely held on with my doge and sold them at 0.01 and today I am licking the wounds when I see the profit unemployed that you stop perceiving.
7 to 8 years, sparks that we have such a short mentality around here, imagine at that time where our leo or hive will be perhaps in the grave or in heaven.
I will stop seeing these projects.
I can't imagine the investors of Tesla or space x seeing how the rockets are flying through the air without seeing any income, or nerolink, wow that would be crazy right, I would not bear that level of stress if I just went coconut broken coconut eaten as we say here.
After reading this I know that I do not have the mentality of an irresist capitalist by any means, from seeing graphs every day, well, wow, those are the great projects, the ones that are being implemented and they are great projects, just the fact that I aggravate Desicieera from hiveengine and put it in the hands of wittness is a great thing, so we see how things are progressing and as onealfa said about blocknet, hive is also a jewel in the rough that when it takes off we will have a lot of capital wanting to enter and we hopefully that is the case now we will have been inside.

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It takes a long term mindset and one that is different from what most people have. They want the instant success. We need to look beyond the next week or quarter and start envisioning how things can truly become.

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Yes, many people have used hive many times as a way of life, their petty cash here in Latin America, thank God we can go slowly here growing little by little.
Thank you for making us dream knowing that today's sacrifice will most likely be tomorrow's enjoyment.
And anyway if it doesn't happen we are having fun and not least I am with a learning curve that I would never have had in my life if not for these platforms.

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Making money is not the primary objective in the early days. Bringing a viable project to market and then getting users is the primary focus.

Very crucial component of the write that captures my interest. This should be the actual path every investment should follow. Do we really have Venture Capitalist for crypto projects? What are their basic undertakings?

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Do we really have Venture Capitalist for crypto projects?

Yes most of what you see in the crypto world is VC funded. Coinbase started through the funding of VCs.

This is what makes Hive different. It does not have that with its applications which means users interests and investor interest will not differ at some point.

That is the problem with the traditional social media. The VCs wanted to get paid so the model changes against the users.

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Very true. But like most solutions other problems follow. We will have groups of users with different interests. We already see it with Hive and Leo. I am not saying bad or good, but interesting for sure. And unlike the current model the Hive model allows anyone to influence.

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I used to play Texas Hold'em. I bring poker to the table because it's hard to avoid the similarities of a poker player and a VCs. Especially when it comes to patience and have one's blood cold enough to endure the downs, if, one is ever aware of them. I posted like a week about how do we have to see crypto to ultimately understand and find the real value within it. To me a Hive is a Hive, a Leo is a Leo. I try to forget about the price against the fiat, more if I'm truly convinced this is going to work long term, just time will tell. Regards.

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That is true if you have avenues to spend your Hive and Leo. So far, we are not adept at building marketplaces. Hopefully that will change shortly.

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It is ironic that this article comes out on a day when the price of HIVE was up 10%. That means many will be happy since they believe there is validation. Ultimately, it means nothing more than if the price was down 10%. The price is not a sign of what is taking place.

Let us not forget that not everyone here is the same. Those who are checking the price every second and jump out their skin when seeing 10% up are those who don't care what's taking place. Their only concern is selling every token to get some fiat. There's nothing to expect from those. They want to get rich quick and are at the wrong place.

And there are those who don't care about the price, it means nothing at the moment because they look at it as a long term project that needs maturation time like cheese.

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Funny you mention this as I know a company just like that where some friends work. The company with all of it's subsidiaries was losing money for years and years and now some of the projects are coming through slowly and are now massive. They invested heavily in tencent and have made bucket loads of money.

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Dang, I wish I could get away with only being expected to be "on" with my job 10% of the time! That would be crazy :) They'd probably have a pretty good career as weather people if VC didn't work out for them! Nice post! Lots of great stuff to unpack in here.

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It is definitely something that is missed in the current market. Venture capitalist are definitely people I admire. I don't think I could stand the pressure for upfronting the costs of tens of projects and hope for a lucky 1 or 2.

I am not concerned with a 10% increase or decrease as I believe more in the fundamentals. TA is only something I use to validate something I am trading as when to enter or exit. For an investment, I consider the long-term prospects of the project as I believe price will go up or down to the fundamentals of the project. I believe HIVE has a longer way to go with all the new developments so I believe that I am only accumulating for the eventually rise.

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It's hard to venture when you have no or little capital :) so it's easier to hodl and be grateful for the awesome things that we have and that are on the horizon for Hive and Leo

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Nice thought ☺️

it's really awesome that we have so many and different projects that are on top of the hive layer. Not only that, but some of these projects are already successful uplifting the value of Hive as well!

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I went to a VCs conference in London and the had 3 projects they were presented to and chose 1 to invest and showed how they went until they have chosen, the early vs more mature projects, numbers and all around those. The idea is important, but people are more important than ever. If you have the right team, are invested in it and address a real problem of nowadays they might respond much better.

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spot on! I have said in the past if not hive and its sister chain I probably would have nothing to do with crypto. I am not a fan of the speculative game. I love the social experience on hive; I love that my passion pays for the bills (although that might change with the new law in my country). It is a fun and wholesome experience, coupled with the development and forward-thinking people we have on the platform, it is grossly underrated. Only time will I believe and even though patience is not one of my many virtues, I want to see this through to the end.

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Yes after obtaining my Series 7 and 3 license i went on to work for several wallstreet firms over the years. During a brief time of about 6 months i worked for a venture capital firm. I did not like working for them at all just entirely different structure. However i can put you in the mindset of how we use to think.

So you're right about price being a lousy indicator of a project. Price at most stages vc firms want to get in on has almost like zero to do with price. In fact they sometimes prefer no price at all as in intial stages. Price also works the opposite way in that especially in a small pool a project can almost become too big to fail. That doesn't necessarily equal advancement but it is possible that enough money can kick a can down the road a long time.

So specifically as you say a vc firm can wait in some cases almost a decade to make a profit. They do have fiduicary responsibility to clients similar to many businesses in management of customer funds unless they are fully funded inhouse outfits in which case they maybe have a bit more leighway to pick good projects. I think the numbers may be worse than 1 out of 10 successful businesses but as you said you can have 1 business out of 100 hit big and still do very well.

It's multiplied far worse in crypto by a a factor of 12. So what i mean is you have this super high unregulated price activity in cryptocurrency no circuit breakers nothing lol. So these guys can make a fortune on speculation and price alone. So what has been happening like you take polkadot for example $150 million thrown at them off the bat. Then we had eos with several billion dollars. So highly speculative markets. Developers get rich instantly sometimes before they build the first product or system. So this can go on for years and there needs not be any significant advancement in the product. Many things don't have to work as well. The investor intially isn't having many problems because speculation has driven his investment value up. However in some cases the advancement of the project itself hasn't really done anything. The devs are paid upfront everyone is making money until they aren't.

Especially in cryptocurrency price doesn't necessarily mean anything about your product as far as people will use it, it will grow, it will solve a problem or a market need. None of this has to be the case in price. It is going to be a problem later. So my honest opinion about steem-hive. I like it i know alot of people on the site do and they think very positive about it. When i was back at the venture capital firm for those grueling 6 months and i'll never go back, lol.

I would have told you all something like i'm about to tell you now. That is steem-hive is probably at the non investment stage at this point.They would have significant positions by now. The structure would have already began to change in my opinion. It's not that venture capital firms aren't aware of steem-hive. It doesn't work that way. It's not like cryptocurrency where we kinda tend to think oh its no marketing its no way to know about us and only if someone did". No vc's jobs are to know everything about everything. I mean they are actually out looking hard for you. So we generally go oh if only they knew about us they'd leave facebook and why don't they get off twitter and don't they know the value of this and they can earn money etc.,

Thats the thing human beings don't function in a logical sense that way. We're unpredictable we're chaotic. Things don't have to make sense to human beings lol. So homework has been done about dpos and for the most part if there was ever a round of funds i dont think there will be anymore.

That said that doesn't mean a project can't emerge on steem-hive and create a market demand. That is possible i feel the longer it goes teh more unlikely but its possible. I'd also say that my professional opinion would have been when Stinc was around and during the boom of 2017 pushing close to a billion valuation as such. There are advantages of being a company on a blockchain. You can sign contracts and create a central direction that in some cases may be needed depending on what type of business you're running in some cases social media works better that way to an extent. They could have used the value they had to acquire other businesses and make profitable investments under their umbrella... like many have done.

Price is a psychological projection of peoples hopes and fears. If price really meant something. Think about products like apple you would just have went and bought as much apple stock as as you could or tesla becaused you'd know how valuable it was. Price at certain stages never indicated to you how valuable it was although the value of the apple legacy and brand was always going to be that valuable.

So those are my thoughts on that. I will say i'm proud to see that the biggest of Vc's people like Tim Draper who has invested some reports like over half his billion dollar fortune in cryptocurrency. Is now interested in ideas like bitcoin ubi. and ubi projects. My belief is Tim Draper knows this economy is in alot of trouble over the next decade. I think he knows that the landscape of this economy will change dramatically and there will be completely different systems than what we've seen..So he's listening to ideas like that now.

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why LEO is 10% down on Hive-engine ..
what things effect on his Percentage

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very good article, add tools to that little investor like what
we are the majority to be able to evaluate and have the capacity to wait in x or y project, in my concept hive is a fairly large ecosystem and mainly we are all contracting it which adds great value

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